Value for money in risk and governance

Regulated Providers’ ultimate frontier?

Registered Providers (RPs) comply with the expectations from the Social Housing Regulator (SHR) about risk management and governance. Applying a value for money lens to risk management and governance can provide benefits. We outline three tips to achieve that.

The Social Housing Regulation Act sets out four new consumer standards covering a range of topics such as safety and quality, tenants, and neighbourhood and community. The main challenge from the standards is setting out outcomes like ensuring that tenants are safe in their homes, rather than offering a prescription of what needs to be done.

The SHR usually refers to this as ‘principles-based’ regulation. Here is a good example from the financial viability standard. “Registered providers shall manage their resources effectively to ensure their viability is maintained while ensuring that social housing assets are not put at undue risk.”

This approach shifts the challenge of meeting standards from knowing the rules to understanding the business and how the regulatory outcomes can be achieved in the context of your business.

Meeting the SHR standards eventually becomes a risk appetite question that seeks a balance between the costs of compliance and the risk of regulatory breaches.

How much do RPs invest to ensure that complaints are addressed fairly, effectively and promptly?
How much do RPs spend on repairs to ensure that they are effective, efficient and timely?

These are not easy questions. Our experience of working with a range of clients in housing and other sectors has enabled us to identify three tips to achieve that.

Set out a clear vision for managing the business appropriately with compliance as a by-product. This means encouraging the identification of trade-offs and the consideration and discussion of costs and benefits.
Focus on decision making – how are value considerations brought to bear on strategic decision making? Are there effective processes and tools to support day-to-day decision making?
Balance between changing design and use. We find that often management focuses too quickly on changing the design of business processes and tools instead of considering how they are used and how they should be used.

It helps to see these tips through an illustrative example.

Example

Testing the extent to which risk management and governance in the business operate effectively.

We worked with management to test specific areas, such as complaints and repairs, on a monthly basis.

When an area was under scrutiny, we would deploy a range of tools, such as reviewing:

data available and identify weaknesses that need to be remediated
risk maps and control frameworks and benchmarking to new standards
governance frameworks by listening and learning from customer scrutiny
design and operating effectiveness of key controls.

The application of this process allowed the identification of weaknesses and proactive remedial action to enhance the effectiveness and efficiency of risk management and governance in these areas. These were reported to senior management and to the audit committee. The client benefited from a gradual enhancement of risk management and governance across a number of areas.

If you want to start the ‘value’ journey, there are three potential questions that you could consider to re-focus risk management and governance.

To what extent are senior management and the board considering the value and benefit of risk management and governance, given the business strategy?
Are senior management and the board clear about the benefits of applying a value lens to risk management and governance?
Is there an open dialogue within the business as to how best to achieve value from risk management and governance?

RPs need to evolve their approach to risk management and governance to meet increased regulatory expectations and focus on business objectives. Crowe has significant experience in helping RPs and other organisations re-focus risk management to support business objectives. Reach out if you would like to explore how Crowe may be able to help.